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Dollars cheaper than renminbi for sovereign bond comeback

Nigeria would be better off issuing its first bond in three years in dollars rather than renminbi, Bloomberg data show.

Nigeria Finance Minister Kemi Adeosun said in April that she is “shopping around for the best deals” to raise about $5 billion of external debt. She said at the time that the renminbi market “may be cheaper than the Eurobond market.”

However, funding in yuan is more than 100 basis points higher than dollars for all maturities, Bloomberg data show. The gap has widened in all maturities, apart from the seven-year, since Adeosun mentioned Panda bonds in April.

Based on Bloomberg calculations in that period yuan funding was never cheaper than dollar funding. This is based on analysis of an indicative funding curve — including Nigeria’s dollar bonds due in 2018, 2021 and 2023 — swapped into equivalent yuan rates.

Nigeria’s dollar funding costs are down about 150 basis points at the short end year-to-date. This is more than other comparable oil producing emerging markets such as Kazakhstan or Colombia.

Dollars Even Cheaper Than Renminbi, Across the Board

Yields are based on Nigeria’s 2018, 2021 and 2023 dollar Eurobonds, converted into Yuan using the relevant day’s exchange rate through a cross-currency swap with quarterly payments.

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